Short Version: $3.1M invested at age 50. Can I quit and go fishing now? Please?

Long Version of the question: I am about to pull the plug and retire, but would first like some outside views on whether it’s advisable. Online calculators indicate we'll be OK, but I’d appreciate any observations or advice you might have on my situation.

Background: Married couple, no kids, no need for leaving a legacy. The goal is to spend it all. Him (me): 50, working, making big bucks at big company, but not loving it; Her: 54, not working (and loving it). No traditional pensions for either of us. His Social Security, assuming stop work now and draw at 70: $3281/month. She would get about half of that; her own earning record is smaller.

Investable assets by account type:

Bank accounts: $25,000

Post-Tax investments: $1,141,000, cost basis $739,000

Cash-balance pension: $294,000 (see below)

401k and IRAs: $1,686,000

Total: $3,146,000

Investment asset allocation

US Stocks: 62.5%

Non US Stocks: 9.3%

Bonds: 17.6%

Cash-balance Pension: 10.6%

In my view, the cash-balance pension is bond-like, so I consider my bond allocation to be about 28% (I’ve wandered a little off my goal of 30%). The cash-balance pension pays interest at the 30-year T-bill rate, or 4%, whichever is higher. Four percent probably seemed like a minimal guarantee when the plan was established, but these days it looks like a fairly high guaranteed rate, so I plan to leave these funds in place for the foreseeable future. I can roll it into an IRA at any point.

Our house is paid off and valued at approx. $400,000. I do not include the house as a spendable asset. It could be a sort of a whoops fund.

Budget:

I have a spending budget after income tax of $90,000/year or 2.9% of investable assets. This budget is slightly higher than my actual spending for the last several years, and it’s based on decades of careful tracking of spending.

A big question mark is my income tax forecast. I have some ability to manipulate income with over $1M in post-tax accounts. If I aim for $64,000 of income through dividends, Roth conversions and capital gains, I think my federal taxes will be about $4500. State (NJ) is harder to estimate – I’ll estimate $2000 based on one online calculator. So my total annual withdrawal from assets is $96,500 including income tax, or 3.1% of portfolio.

I have priced a silver health insurance plan through the state exchange at $16,300/year unsubsidized. If my income is under 400% FPL (likely), I would save at least $10,000/year through subsidies for as long as subsidies last. COBRA would be about $14,000/year. I am not counting on subsidies so I have budgeted $22,500/year for healthcare and dental including insurance and out-of-pocket costs. This is part of the $90K budget mentioned above.

We have two decent cars with no loans. We might reduce to one car, but budgeted for two, replacing one car every 5 years.

Firecalc says, assuming zero SS: We can spend $100,000/year for 45 years with 100% success.

i-ORP says, assuming zero SS: Our projected, maximum, annual disposable income is $97,000 in today's, after tax dollars. When I change to “Extended ORP” it increases to $162,000 before I even change anything. I don’t understand the difference, but even the smaller number of the basic ORP says I’m OK.

Financial Engines says: "By age 51, your current investments may be worth $3,060,000 or less. That amount could produce $151,000 or less per year of income in retirement if market performance is average. If market performance is poor, it may produce $134,000 per year or less."

Downside risk:

I don’t plan to buy long-term care insurance. Que sera sera.

Healthcare costs are likely to inflate at an insane rate.

I’ve modeled my retirement at age 51 in i-Orp and FE to use whole numbers, but hope to get out at age 50.5.

Upside risk:

We can sell the house if/when needed.

Social Security may actually exist when I’m eligible (I’m currently modeling retirement without SS).

We may be eligible for ACA subsidies.

The budget includes $7K per year for travel, which is discretionary and probably won’t be used after we get really old.

We can reduce to one car.

So if you've read this far, please take another minute and tell me what you think. Does it look like I'm in good shape for retirement at age 50 and a half? Any advice? Thanks in advance.

I'm impressed - almost every "Can I retire?" post contains gaping holes like not including any healthcare costs in their budget and also forgetting to make any attempt to estimate taxes. You have done a good job of thinking things through and laying it out.

Here are some of my thoughts FWIW:

I do think that it is unlikely that you will be able to count on ACA subsidies for very long.

You have only modeled taxes initially while you are pulling mostly from after-tax accounts. But based on the amount of your annual withdrawals, I don't think that your after-tax accounts will last until you are 70.5. Once you start drawing down your pre-tax accounts, taxes will go way up. I think you need to do some more in-depth modeling and project spending out for many years. It may not be feasable to delay SS until age 70.

Your asset allocation is pretty aggressive for someone who wants to retire after a 9-year bull run in the stock market. If we hit a really bad patch in the stock market, you will have no choice but to continue drawing down your account until you are eligible to start SS at 62. In addition, if you run through your taxable account before 59.5 you would have to set up a SEPP withdrawal plan for a minimum of 5 yrs or until you hit 59.5 whichever is longer.

Yes, you should be fine spending under 3% of $3 million. Even if your investments only kept up with inflation over the long run, that would last for 33 years or until you are 83 and your wife is 87. That is more than your expected life spans. Congratulations!

I don't think you understand how the statistics work. Those are median life spans - meaning 50% of the people will live longer - sometimes a LOT longer. It would be irresponsible to assume a 33 year lifespan for some retiring at 50. Thirty years is pretty typical for someone retiring at 65.

You're assuming ACA or other health coverage will be available to you at some price. That's the serious risk--together with no Long Term Care coverage--I see with your plan. Other financial aspects look fine IMO although I didn't run sensitivities for lower returns.

In a recent lawsuit, it APPEARS our federal government sought to invalidate the "mandated coverage for pre-existing conditions" portion of ACA. Weirdly, some analysts believe this could also impact guaranteed coverage for sick people who get their health coverage through work (remember the bad old days when people would stay at a job because they couldn't get their conditions covered if they switched jobs & insurers???) I've linked to a reputable site's discussion of this lawsuit because I am not an expert in this area. https://theincidentaleconomist.com/word ... -coverage/

Politics is beyond this Forum plus I don't have my crystal ball handy--so I can't predict future litigation, legislation or the future health of you & spouse. If you're both in absolutely perfect health now, have no family history of cognitive disease & will remain engaged & flexible enough to go back to work if the private market for health insurance collapses--perhaps it's not much of a risk. Any early retiree should look at ACA networks in the area he will live in during retirement; don't just look at the premiums (some states only have HMOs & have no physicians (vs PAs, NPs) in the rural areas which many retirees love).

I have worked hard to maintain my health & been lucky. I was able to obtain private (non-ACA) BCBS insurance--the cost of which has grown astronomically since my retirement. But, until ACA, I was at risk for my policy being non-renewed had I ever been in--for example--an accident.

Thanks for the link. I just retired at 59 and healthcare pricing concerns are what stopped me from retiring earlier. I'm on COBRA at least for the rest of this year. (My salary for the part of the year I worked plus my planned Roth conversions for this year made me ineligible for an ACA subsidy).

I realized the whole health care question could get ugly, but it just got potentially a lot worse. Depending on how narrow a definition they take for pre-existing conditions (hypertension? high cholesterol?) I may have trouble getting health care in the future.

I don't think you understand how the statistics work. Those are median life spans - meaning 50% of the people will live longer - sometimes a LOT longer. It would be irresponsible to assume a 33 year lifespan for some retiring at 50. Thirty years is pretty typical for someone retiring at 65.

You have to assume something and your expected lifespan is a reasonable assumption as it changes over time. The older you get, the longer your total lifespan is expected to be. It's probably enough to just use the tables and adjust yearly and especially so when making the additional and conservative assumption that returns will only equal inflation.

Short Version: $3.1M invested at age 50. Can I quit and go fishing now? Please?

Long Version of the question: I am about to pull the plug and retire, but would first like some outside views on whether it’s advisable. Online calculators indicate we'll be OK, but I’d appreciate any observations or advice you might have on my situation.

Background: Married couple, no kids, no need for leaving a legacy. The goal is to spend it all. Him (me): 50, working, making big bucks at big company, but not loving it; Her: 54, not working (and loving it). No traditional pensions for either of us. His Social Security, assuming stop work now and draw at 70: $3281/month. She would get about half of that; her own earning record is smaller.

Investable assets by account type:

Bank accounts: $25,000

Post-Tax investments: $1,141,000, cost basis $739,000

Cash-balance pension: $294,000 (see below)

401k and IRAs: $1,686,000

Total: $3,146,000

Investment asset allocation

US Stocks: 62.5%

Non US Stocks: 9.3%

Bonds: 17.6%

Cash-balance Pension: 10.6%

In my view, the cash-balance pension is bond-like, so I consider my bond allocation to be about 28% (I’ve wandered a little off my goal of 30%). The cash-balance pension pays interest at the 30-year T-bill rate, or 4%, whichever is higher. Four percent probably seemed like a minimal guarantee when the plan was established, but these days it looks like a fairly high guaranteed rate, so I plan to leave these funds in place for the foreseeable future. I can roll it into an IRA at any point.

Our house is paid off and valued at approx. $400,000. I do not include the house as a spendable asset. It could be a sort of a whoops fund.

Budget:

I have a spending budget after income tax of $90,000/year or 2.9% of investable assets. This budget is slightly higher than my actual spending for the last several years, and it’s based on decades of careful tracking of spending.

A big question mark is my income tax forecast. I have some ability to manipulate income with over $1M in post-tax accounts. If I aim for $64,000 of income through dividends, Roth conversions and capital gains, I think my federal taxes will be about $4500. State (NJ) is harder to estimate – I’ll estimate $2000 based on one online calculator. So my total annual withdrawal from assets is $96,500 including income tax, or 3.1% of portfolio.

I have priced a silver health insurance plan through the state exchange at $16,300/year unsubsidized. If my income is under 400% FPL (likely), I would save at least $10,000/year through subsidies for as long as subsidies last. COBRA would be about $14,000/year. I am not counting on subsidies so I have budgeted $22,500/year for healthcare and dental including insurance and out-of-pocket costs. This is part of the $90K budget mentioned above.

We have two decent cars with no loans. We might reduce to one car, but budgeted for two, replacing one car every 5 years.

Firecalc says, assuming zero SS: We can spend $100,000/year for 45 years with 100% success.

i-ORP says, assuming zero SS: Our projected, maximum, annual disposable income is $97,000 in today's, after tax dollars. When I change to “Extended ORP” it increases to $162,000 before I even change anything. I don’t understand the difference, but even the smaller number of the basic ORP says I’m OK.

Financial Engines says: "By age 51, your current investments may be worth $3,060,000 or less. That amount could produce $151,000 or less per year of income in retirement if market performance is average. If market performance is poor, it may produce $134,000 per year or less."

Downside risk:

I don’t plan to buy long-term care insurance. Que sera sera.

Healthcare costs are likely to inflate at an insane rate.

I’ve modeled my retirement at age 51 in i-Orp and FE to use whole numbers, but hope to get out at age 50.5.

Upside risk:

We can sell the house if/when needed.

Social Security may actually exist when I’m eligible (I’m currently modeling retirement without SS).

We may be eligible for ACA subsidies.

The budget includes $7K per year for travel, which is discretionary and probably won’t be used after we get really old.

We can reduce to one car.

So if you've read this far, please take another minute and tell me what you think. Does it look like I'm in good shape for retirement at age 50 and a half? Any advice? Thanks in advance.

"Does it look like I'm in good shape for retirement at age 50"
Yes - it does
"Any advice?"
Since you asked here are a few things that will likely really help:
- Get very proficient with IORP long version and compare future choices and potential variable
- Once comfortable with IORP spend the time to populate the RPM calculator spreadsheet with your favorite IORP run(s)
- Also check your favorite runs from IORP and RPM with tax software for a couple of future years , we have done this and found no real issues.
- Please add some form of SS in your projections for optimized planning purposes (IORP /RPM), it makes a difference in approach and outcome
- Your tax planning will become clearer with SS added and utilizing the calculators , hence your realized spending dollars and budgets will also

Your planned budget of $96.5 after taxes includes $22 healtcare and $7 for vacation - that leaves $67.5 for the balance of spending. In retirement with no kids and a paid off home that seems pretty high after HC and vaca - we are in LI NY sor a similar area and have run these numbers also.
Good luck and hope this helps

You seemed to have planned just about everything (no surprise as organized you come across). Have you planned additional fishing costs in your budget? I assume so, but it was not specifically addressed.

Do this for a year, or two and reevaluate. Also you are going to need some activity to keep your mind nimble. Keep away from the news channels.

What did we do before the ACA was around? Just get private health insurance from ER to 65?

Yes, if people could find it, if it covered pre-existing conditions, and if it was affordable. “Private” isn’t really the right term — individual or non-group coverage are more accurate. The pre-existing condition problem was huge — if you’d had breast cancer, you could only find insurance that did not cover you for breast cancer (for example) or you couldn’t find it at all.

So lots of people couldn’t get individual coverage, and they either went without or kept working in order to maintain employer-provided (group) coverage.

1. If--as the source I cited contends the Administration is urging--ACA's mandated coverage for pre-existing conditions ends, that may apply to employer coverage as well as individual marketplace coverage. In other words, the "go get a job" alternative only works if the new employer's insurer accepts new employees' pre-existing conditions or if you & yours are in perfect health when you go looking for a job to plug the coverage hole left by ACA folding [still only hypothetical at this stage]. Remember, pre-ACA, all those people stuck in jobs because they were sick or had a sick spouse, etc.???

I had a quite rich co-worker about 10 years ago who either him or his spouse (don't remember which) was uninsurable because of pre-existing conditions. He was 60 at the time but was waiting until he was COBRA distance from Medicare to retire. He was pretty well off as well as an early employee of a 80's tech startup that was and still is very successful. He must have been mid to high 7 figures wealthy. However, he couldn't buy insurance so he kept working to have health insurance.

The problems then were at least knowable. The problems that are coming in the US health care system are unknowable. It may take a couple of years to sort out if ACA is forced into failure. If I was retiring now and was planning to remain in the US and had no other health insurance (i.e. retiree coverage) then I would hold off until things settled down. It may still be expensive but it will be known.

I retired coming up on 2 years ago and only stayed in the US until COBRA expired. I'm traveling now and have expat health insurance that required some explanations of previous conditions and may not have been issued. It's not cheap mostly because it includes coverage inside the US for up to 6 months a year. If I had not included the US coverage the cost would have been half or less. I'll transition to another developed country's national health system this fall.

The problems then were at least knowable. The problems that are coming in the US health care system are unknowable. It may take a couple of years to sort out if ACA is forced into failure. If I was retiring now and was planning to remain in the US and had no other health insurance (i.e. retiree coverage) then I would hold off until things settled down. It may still be expensive but it will be known.

What do you think is going to happen in the next to years that is going to provide clarity going forward? If had thought this uncertainty would be resolved in the next couple of years, it is possible I may have waited until then to retire. I get the sense it will take (much) longer than that to get any resolution. Until then we will likely stumble along from one bad set of options to another. So, for me, I saw the options as postpone retirement indefinitely, or go ahead and take some risk, preparing for it the best i can (have a big budget set aside to get coverage). I chose the latter, but I can certainly see the rationale for choosing the other path.

If the Federal programs do go away without any replacements (multiple proposal that were considered last year maintained pre-existing protections), there are states that already had protections in place prior to ACA, and it is quite likely others will act as well (several started preparing legislation last year when congress was considering its repeal bills). It will not be cheap, but I am optimistic that there will be viable options available to us, as long as we stay flexible.

Once in a while you get shown the light, in the strangest of places if you look at it right.

His Social Security, assuming stop work now and draw at 70: $3281/month. She would get about half of that; her own earning record is smaller.

You have 8 years before you have to make any decisions, but make sure you evaluate your SS using one of the calculators like: opensocialecurity.com (there a bunch of others).

In most cases I have worked through, the best arrangement for married couples is for the lower earner to file very early and the high earner to defer to age 70. The dominant factor is that the surviving spouse gets the higher benefit of the two so it is important to maximize the high earner’s benefit. But there are a lot of years between your wife turning 62 and you turning 70 and if she takes her benefit early that generates cash flow for a lot of years.

Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Have you considered a bond tent? Michael Kitces has a write-up about using a tent to reduce portfolio risk in the years immediately before and after retirement.

In your case, you already have sufficient funds to retire, so it will be more of a bond lean-to. The basic idea is that you would choose a more conservative asset allocation now (say 50% equity / 50% fixed income) and then gradually increase your equity percentage post-retirement. Ideally, this would give you some protection against sequence of returns risk. The trade-off being a potentially smaller final portfolio balance. Since you have don't need to leave a legacy that's probably not a huge issue for you.

Not to derail this post - in fact - good luck to the OP on the decision to retire! Great job on your financials and having the choice to leave the workforce at a young age. Happy fishing.

If Marcopolo is still around - I don't disapprove of anyone's personal decision on what risks to consider when retiring many years before the "traditional" age. But I do see a number of posts that reference buying health insurance through the ACA. The ACA offered more than just the ability to get subsidies - it guaranteed access even with pre-existing conditions, a benefit which also transferred to individual and group insurance. I am glad several others have chimed in to further the discussion. My opinion is only applicable to me - and the risk of not being able to buy insurance at any price is the bogeyman in my plans. If we have a bad sequence of returns, I can ratchet down spending, or claim SS at a younger age. Losing health insurance is more of a black swan (to me).

Why is it that I think this scenario would be a little tight for me, personally?
4% withdrawal is 124,000 before taxes. Since my plan would be not to touch my Roth until everything else is gone , then I m probably going to incur 15000 to 20000 in income taxes. That s just an intuitve guess, I didn t run any numbers. Then unexpected expenses. ( I have had to replace two air conditioners and a roof in the last year.)
Forty years of retirement. High inflation may make that 4% initial withdrawal rate, adjusted for inflation yearly, a bit problematic.
I know. I worry about a lot of possibilities. But I know that a few additional years of accumulation , even with part time work, is going to make retirement more comfortable.
I could have retired at age 50. But with two kids to educate, I kept going . My life is much different now than it would have been if I retired at 50. Of course everybody knows that delayed reirement withdrawals always results in a higher payout ( like social security).
If were you and I really hate my job, then I quit. Maybe find some part time work. If I don t mind my job, then I try to arrange more time off. Or get another job, part time. I know that, in your place, once I quit work for a couple of years, it would be hard for me to go back.
I know I m a security freak. All these other guys/gals are probably right. Just food for thought.

Not to derail this post - in fact - good luck to the OP on the decision to retire! Great job on your financials and having the choice to leave the workforce at a young age. Happy fishing.

If Marcopolo is still around - I don't disapprove of anyone's personal decision on what risks to consider when retiring many years before the "traditional" age. But I do see a number of posts that reference buying health insurance through the ACA. The ACA offered more than just the ability to get subsidies - it guaranteed access even with pre-existing conditions, a benefit which also transferred to individual and group insurance. I am glad several others have chimed in to further the discussion. My opinion is only applicable to me - and the risk of not being able to buy insurance at any price is the bogeyman in my plans. If we have a bad sequence of returns, I can ratchet down spending, or claim SS at a younger age. Losing health insurance is more of a black swan (to me).

I may be a little more optimistic in my outlook, but i largely agree with you. This is certainly a big (maybe biggest) risk to an early retirement plan. I think reasonable people can come to different decisions on the level of risk they are willing to take. As for my thought process, rather than repeat myself, I would point you to my response to Hyperboa a few post up from this one.

Best of luck to you.

Once in a while you get shown the light, in the strangest of places if you look at it right.

I've been out enjoying real life; that's why there's been a delay in my response. I regret that the perceived "tone" of my comments about health care coverage offended anyone. Simply stated, I was noting that although the OP had announced his decision in the comments, I was still writing my comments for the benefit of others reading this thread in preparation for their own early retirement. No snark was directed at the OP; I've sent him a PM to ensure that he knows that.

First, I AM an early retiree so I'm speaking from personal experience. When I retired at 42, I thought I had guaranteed, comprehensive coverage through my former employer's plans. I wouldn't have taken early retirement without it. When that company went bankrupt, all employees lost coverage. My backup plans (an association plan and an alumni plan) proved to be unavailable. Because I was in perfect health, I was able to buy an individual BCBS policy which (as is common with individual policies) renewed each year. It had a high deductible and became progressively more expensive through the years. The scariest part was that, before ACA protection was placed into law, I could have been non-renewed any year. So, my worry was always that if I got hit by an uninsured motorist while out on my bicycle at the end of the policy year, the insurer would decline to renew my policy while I was in the middle of surgeries/rehab. [This isn't scaremongering; many cancer victims were non-renewed & could not obtain another policy which didn't exclude cancer of any type as a pre-existing condition]. Pre-ACA, individual policies from reputable insurers were seldom available to the old and virtually never written to cover the sick. I wasn't taking any meds; had years of clean well-woman testing to attest to no cancer; normal blood pressure; sugars, etc. I have heard that, for my area's BCBS, any scrip would disqualify an applicant (although not all prescriptions resulted in non-renewal once a policy had been written). And, yes, pre-ACA, people stayed at jobs to retain insurance coverage for themselves or their loved ones. I doubt I'm the only person who knows someone who went through that.

Second, as for the comment about my wanting people to cower in the corner or whatever...people need courage to achieve their dreams. I believe, however, that it's not courage unless you understand and appreciate the risk you're taking. That's all I am trying to do. I worked in a large company; none of the former colleagues I spoke to years ago (at their request to discuss early retirement) ever understood how different the pre-ACA individual insurance marketplace was from corporate health insurance. It's as if people decide that nothing that bad could possibly be allowed to happen to them. Before ACA, I would have former co-workers who didn't believe my cautions call me when they couldn't get an individual policy & COBRA was running out. I decided back then I would try to be blunter in describing potential risks, because once you're retired, your options are more limited.

Third, unlike the environment into which I retired (pre-ACA), we don't know whether the ACA (or some part of it) will survive or some substitute for it will be enacted. The news might not be bad. For people retiring as early as I did (23 years to Medicare) it's just that there's a significant period of time to be covered at a time of life when health doesn't always improve. Posters mentioned that Medicare may be capitated in the future; of course, that's a risk we all face. The over-65 age group is a significant voting bloc, however. Early retirees (especially those perceived by many as wealthy) may be less sympathetic and aren't as numerous.

Fourth, I believe these are the alternatives if we go back to pre-ACA conditions after you retire but before you're eligible for Medicare: (a) seek medical care overseas (there have been numerous threads on this); (b) buy sharing policy from one of the religious groups which offer them (different from insurance; there have also been threads on these); (c) you or spouse get a job which provides decent insurance that will cover any pre-existing conditions you or yours may have at that time; or (d) you rely on state risk pool coverage (bad networks; largely unavailable in my state--there are threads on this topic too). I hope that association plans which are open to early retirees might be developed. I hope that pre-existing condition coverage is mandated even if it's at a higher price point. I hope for a lot of things. Most of all, I hope early retirement goes well for anyone who chooses it.

I've been out enjoying real life; that's why there's been a delay in my response. I regret that the perceived "tone" of my comments about health care coverage offended anyone. Simply stated, I was noting that although the OP had announced his decision in the comments, I was still writing my comments for the benefit of others reading this thread in preparation for their own early retirement. No snark was directed at the OP; I've sent him a PM to ensure that he knows that.

First, I AM an early retiree so I'm speaking from personal experience. When I retired at 42, I thought I had guaranteed, comprehensive coverage through my former employer's plans. I wouldn't have taken early retirement without it. When that company went bankrupt, all employees lost coverage. My backup plans (an association plan and an alumni plan) proved to be unavailable. Because I was in perfect health, I was able to buy an individual BCBS policy which (as is common with individual policies) renewed each year. It had a high deductible and became progressively more expensive through the years. The scariest part was that, before ACA protection was placed into law, I could have been non-renewed any year. So, my worry was always that if I got hit by an uninsured motorist while out on my bicycle at the end of the policy year, the insurer would decline to renew my policy while I was in the middle of surgeries/rehab. [This isn't scaremongering; many cancer victims were non-renewed & could not obtain another policy which didn't exclude cancer of any type as a pre-existing condition]. Pre-ACA, individual policies from reputable insurers were seldom available to the old and virtually never written to cover the sick. I wasn't taking any meds; had years of clean well-woman testing to attest to no cancer; normal blood pressure; sugars, etc. I have heard that, for my area's BCBS, any scrip would disqualify an applicant (although not all prescriptions resulted in non-renewal once a policy had been written). And, yes, pre-ACA, people stayed at jobs to retain insurance coverage for themselves or their loved ones. I doubt I'm the only person who knows someone who went through that.

Second, as for the comment about my wanting people to cower in the corner or whatever...people need courage to achieve their dreams. I believe, however, that it's not courage unless you understand and appreciate the risk you're taking. That's all I am trying to do. I worked in a large company; none of the former colleagues I spoke to years ago (at their request to discuss early retirement) ever understood how different the pre-ACA individual insurance marketplace was from corporate health insurance. It's as if people decide that nothing that bad could possibly be allowed to happen to them. Before ACA, I would have former co-workers who didn't believe my cautions call me when they couldn't get an individual policy & COBRA was running out. I decided back then I would try to be blunter in describing potential risks, because once you're retired, your options are more limited.

Third, unlike the environment into which I retired (pre-ACA), we don't know whether the ACA (or some part of it) will survive or some substitute for it will be enacted. The news might not be bad. For people retiring as early as I did (23 years to Medicare) it's just that there's a significant period of time to be covered at a time of life when health doesn't always improve. Posters mentioned that Medicare may be capitated in the future; of course, that's a risk we all face. The over-65 age group is a significant voting bloc, however. Early retirees (especially those perceived by many as wealthy) may be less sympathetic and aren't as numerous.

Fourth, I believe these are the alternatives if we go back to pre-ACA conditions after you retire but before you're eligible for Medicare: (a) seek medical care overseas (there have been numerous threads on this); (b) buy sharing policy from one of the religious groups which offer them (different from insurance; there have also been threads on these); (c) you or spouse get a job which provides decent insurance that will cover any pre-existing conditions you or yours may have at that time; or (d) you rely on state risk pool coverage (bad networks; largely unavailable in my state--there are threads on this topic too). I hope that association plans which are open to early retirees might be developed. I hope that pre-existing condition coverage is mandated even if it's at a higher price point. I hope for a lot of things. Most of all, I hope early retirement goes well for anyone who chooses it.

Best Wishes

Thank you for the well reasoned explanation.
I apologize for misunderstanding the intent of your comments, I did take it as snark directed to the OP.
As i have mentioned in several posts now, I do agree that this is a huge (maybe biggest) risk for early retirees, and needs to be thought about seriously.

It is still not clear what you are proposing as an alternative to the risk of losing access to Health Insurance for early retirees.
Should they continue to work until Medicare age?
For every story of someone who was financially devastated due to medical expenses, there is probably a story of someone who died prior to reaching medicare age.

There are states that had such protections prior to ACA, and others that were in the process of introducing them when ACA repeal was being voted on.
In the history of the US, it has been very difficult to take social program away once they have been in place for a while. I am more optimistic that there will be manageable, but possibly expensive, options. As difficult as you describe your post-retirement experience, here you are, presumably still not financially wiped out.

Best regards.

Once in a while you get shown the light, in the strangest of places if you look at it right.

MarcoPolo: I am proposing that, before workers take early retirement, they understand the risk of ACA coverage becoming unavailable and have a workable plan to deal with that scenario should it happen. Here on the Forum, we help others reality-test their plans.

Health care costs can derail your retirement. If you don't have insurance, you don't get the lower, negotiated rates from providers. If you've ever seen medical bills for someone who has had a heart attack and surgery or who has been in a serious auto accident--they can be astronomical. Spending a million dollars on a serious health care incident is not impossible if you are uninsured. My point is that health care costs were a major risk for early retirees like me pre-ACA.

You keep asking what my solution is if ACA protections disappear after someone has retired but before he is eligible for Medicare. I set out the only four alternatives I see in my last post: Overseas health care; religious or affinity group cost sharing (not real insurance); getting a new job with coverage; or--least attractive--relying on any "uninsurable risk pool" arrangement your state provides.

For people with excellent health and a willingness to return to work, getting a job with coverage is the most obvious solution. A person with currently-needed skills in the high-tech area might find a job with coverage easily and might enjoy the work. Lots of people assume a barista position at Starbucks with insurance coverage for part-time hours is theirs for the asking. That depends on the job market, I suppose, as well as the individual's attitude. Whether the small risk that one might need to work as a barista (hoping the manager gives you enough hours each week to qualify for continued health coverage) is better than slaving away at one's current occupation is a decision each person needs to make on his own. Personally, I felt I could get a job in my former occupation that would provide coverage if absolutely necessary. But, had I known employer coverage would become unavailable, I don't know if I would have taken early retirement.

In my state and others I have studied (as potential places to live), the state risk pools for otherwise uninsurable people did not function well. Because the reimbursement rates were low, few providers accept the pool coverage. Also, my state's pool ran out of money & stopped accepting new participants. At a time of efforts to reduce Medicaid budgets, I'm not sure increased funding for uninsurable risk pools is a given. If your state had a well-functioning system pre-ACA, then that's great. They might reinstate the program if the ACA goes away. Or they might not.

I don't believe that helping "wealthy" early retirees obtain insurance is a big priority for groups like AARP let alone for politicians. [Many early retirees get insurance through their employer--as I thought I would--so we don't represent a huge voting bloc.] The impact on people who are laid off involuntarily (especially layoffs due to their illness) might be stronger motivation for retaining ACA protections on pre-existing conditions. I haven't heard any general outcry over the current administration's lawsuit seeking to invalidate ACA protections, however.

MarcoPolo: you mentioned that I presumably survived financially despite the pre-ACA insurance situation. That's absolutely true. I've been fortunate enough to enjoy excellent health and no serious accidents and had enough of a portfolio that my after-tax withdrawal rate remained below 2% even as the BCBS premiums increased. I'm very grateful each moment for my good health and for the positive SOR I've experienced in my portfolio. I have loved my early retirement.

Counting on luck isn't really the Boglehead way, though, although I sincerely hope none of us experience the potential downsides I've outlined. Again, best wishes.

I'm looking at going at 55 or so (about 1.5 years) with a lot less money but with lower ongoing expenses. Healthcare for the 10 years I'll be ineligible for Medicare is a worry. I currently plan for about $24K/yr (unsubsidized Bronze plan plus annual OOP max last time I checked) but there is a definitely a possibility that ACA will will cease to exist or be rendered useless to me. My only real alternative is to work 5 more years to be eligible to buy into my company's plan at full cost, or work ten years to Medicare. So far my decision has been to gamble and retire at 55 but the medical insurance question weighs heavy. OP being considerably ahead of me in accumulation has more ability to withstand a disruption in the ACA landscape. Statistically retirees spend about $10K/year/person so I'm planning for 2.4X the average as it is, but as has been pointed out, one crisis could really put a wrinkle in things, including making a return to work impossible). It's good to think through options and have some backup plans, but at the same time letting fear be the operative motivator in life isn't good either.

I don't want to derail the thread and I realize this isn't an option for everybody, but I plan to early retire and the way we are hedging against the health insurance issue is by using the FEHB. Granted, there is a big cost to it, namely in the form of my wife taking a 50-60% pay cut to enter federal service, but it was something she wanted to do anyway so kind of a win-win. Well, other than the lost income.

You keep asking what my solution is if ACA protections disappear after someone has retired but before he is eligible for Medicare.

To belabor this point just a little more. This was not really what i was asking.

You accurately describe the possible risks and say one should consider them and have a workable plan. But, then you seem to go on to say no plan is really workable, if you want certainty. Even a "guaranteed" plan is not really safe, as you discovered.

In the end one has to make a decision. That is the question I am asking. For the prospective early retiree who is otherwise financially prepared at age 50 (or 42 in your case), they have to make a real decision about whether to pull the trigger or not. The choices are (a) No, Work at least until Medicare age (b) Yes, Take some risk. What is your recommendation?

Do you believe choice (a) is risk free? You can't just focus on risk to one side of a decision, you have to balance that with risk on the other side as well.

You have lived through this so you certainly have a much better perspective than i do. Knowing you would lose your employer "guaranteed" insurance, If you could go back and advise your 42 year-old self. Would you tell yourself to keep working until Medicare? Do you regret having taken the plunge and retired early?

Once in a while you get shown the light, in the strangest of places if you look at it right.

Despite how much I have adored my early retirement freedom, and despite my having what many would consider a low withdrawal rate from my assets, I absolutely would NOT retire early unless I had a workable plan (with backups) to obtain health care coverage. Instead, I might have altered my career trajectory to achieve better work-life balance (given my financial independence) or (more likely) I might have gone back to my first career in a more flexible job which carried health benefits.

This all assumes I knew then what I know now. Back then, I was a very healthy person with cushy corporate health benefits which I took for granted. I'd never seen a hospital bill for a serious accident or illness. [BTW, I'm not ragging on providers. Their reimbursements seem to be going down even as bills rise.]

I understood, and had factored into my financial simulations, that I was bearing the risk of possibly being uninsured for long-term care (having helped two parents through that stage of life). There's no family history of cognitive impairment, so I budgeted funds for a few years of assisted living and prayed. But, how many millions does one set aside for being uninsured for health care for decades, without even knowing how the expenses will be treated for tax purposes??? Sometimes, on a site like this, people (including me!) obsess over precise calculations of known liabilities while ignoring the known but unexpected swan in the soup (if you'll pardon the phrase) because it's too hard to think about or will ruin our fun of being able to retire early. Trust me, this topic makes my head hurt too.

Because my employer-provided coverage terminated well after I had "pulled the plug", I chose to take the huge risk and not go back to work immediately. If my purchased individual health insurance had been non-renewed, but I was still able to work, I believed I could go back to work in my first career because I received offers to do so. I did take steps to keep my certifications/continuing education current in that field (which I hadn't planned to do originally) as a fall-back. I also have dual citizenship with a country which (after a waiting period) at that time would offer some health coverage so--if I were able to travel--I could emigrate. [I haven't researched that option recently to know if it's still viable.] I know a man who married largely to get health coverage. Mates from my second-to-last job asked their spouses to go back to work at places with family coverage. I encouraged another to apply to work at a store with benefits (given that fellow's "I'm all that plus the bag of sweets on the side" attitude, the suggestion wasn't well received). Truthfully, I always assumed many of these jobs would be beyond me, not beneath me, given how some members of the public behave towards staff in stores. I was raised by wolves & even I know better!

If I had another person or children depending on me, I'd have been especially cautious. But, even on my own, I would not choose to go without health coverage for a long period of time. Sure, lots of unexpected risks can arise in life. To my (too conservative?) way of thinking, however, that possibility does not justify knowingly assuming other risks unless one is prepared for the consequences of the assumed risks. At a minimum, have some contingency plans available that you've reality-tested.

I really wish the best for early retirees; maybe we'll get a positive result on health care legislation and all of this will be moot. I sincerely hope so. Nothing would make me happier than to be proven to be 100% wrong on these risks. I feel I've said way more than what people need to hear on this topic, so I'll leave the discussion to others going forward.

Despite how much I have adored my early retirement freedom, and despite my having what many would consider a low withdrawal rate from my assets, I absolutely would NOT retire early unless I had a workable plan (with backups) to obtain health care coverage. Instead, I might have altered my career trajectory to achieve better work-life balance (given my financial independence) or (more likely) I might have gone back to my first career in a more flexible job which carried health benefits.

Hi Patricia,

thanks for your personal story and insights. I agree with a lot you write.

My problem is that uncertainty essentially means that the best plan and the backups may not work in all cases. E.g., we are 10-12 years away from Medicare and seriously thinking about ER.

Plan A: We have the resources to cover an ACA plan for the time period if that is what it takes.

Plan B: My wife also has a reasonably good chance to go back to her career and get a position with healthcare benefits. The outlook for restarting a corporate career is less good for me (tech industry bias against grey hairs, and geographic location).

Plan C: As mentioned by others, there might also be state-specific options. If our state were not providing a viable option, we could relocate.

Plan D: Worst case, we should also have the ability to utilize dual citizenship to relocate to a European country with a solid healthcare system.

Plan E: Another safety net for us is to mentally designate a significant percentage of our funds as "self-insurance" for the worst scenario. This would mean spending less during the years leading up to age 65 and having a really good time once Medicare kicks in. Plan E can't really be "chosen" when everything else has failed; the decision to has to be made upfront, before spending the money

The problem is that the layers of plans and backup plans still are 100% bullet proof. The challenge for me is to quantify the risk we are taking if we pull the plug. There is really no firecalc to provide easy answers for this. If I knew there was a 50% chance that ACA and/or preexisting condition coverage was eliminated between now and age 65, I would likely make different decisions today than if the chance was 5%. Or 90%. (and of course, even choosing to continue my career for the sake of receiving healthcare benefits is not a safe option; I could be laid off tomorrow or next year).

Ten years ago, before ACA was even created, I wasn't thinking about the possibility of ER. But I probably would have actively explored relocation to Europe as the best choice at that time. I should probably spend more time on working through that scenario again, to at least fully understand it.

The concern about changes for the worse in the ACA or its elimination is definitely a big issue for early retirees.

One thing that I never see mentioned, however, is that this concern shouldn't be specific to retirees or people who don't have employer insurance... Yes, it's worse for them than for people with employer insurance, but having employer insurance doesn't mean you're secure. If you get seriously sick, you will almost certainly lose your job, which means losing your insurance. You can pay for COBRA for a while, but that has limited duration. When that ends, you're in the individual market with the same problems faced by early retirees. The only difference is that possibly you got insurance for a bit longer after getting sick if it happened while you had employer insurance.

In other words: yes, ACA uncertainty is a huge concern for early retirees, but it's not specific to them. I'm not sure I would let that drive my retirement decisions because I feel vulnerable to the same issues even while working, just a bit less so.

The concern about changes for the worse in the ACA or its elimination is definitely a big issue for early retirees.

One thing that I never see mentioned, however, is that this concern shouldn't be specific to retirees or people who don't have employer insurance... Yes, it's worse for them than for people with employer insurance, but having employer insurance doesn't mean you're secure. If you get seriously sick, you will almost certainly lose your job, which means losing your insurance. You can pay for COBRA for a while, but that has limited duration. When that ends, you're in the individual market with the same problems faced by early retirees. The only difference is that possibly you got insurance for a bit longer after getting sick if it happened while you had employer insurance.

In other words: yes, ACA uncertainty is a huge concern for early retirees, but it's not specific to them. I'm not sure I would let that drive my retirement decisions because I feel vulnerable to the same issues even while working, just a bit less so.

Many people don't realize that if you become disabled and can't work, you will automatically be enrolled in Medicare after two years of Social Security disability SSDI payments. So there is that safety net already in place.

However, if you retire early, you might not qualify for Social Security SSDI payments if you become disabled, and that eliminates the potential pathway to early Medicare.

Retirement: When you reach a point where you have enough. Or when you've had enough.

To some retirement is a dream, to others it's a nightmare. Having enough resources is one part of it, make sure you some ideas about what you'll do with all the free time. Retirement is just another stage of life with its challenges, joys and sorrows.

Those who move forward with a happy spirit will find that things always work out.

I have a hard enough time understanding the willingness of a 62 year old to believe old historical US market data are the perfect independent variables for modeling a 30 year retirement period. The thought that a 50 year old would do so is unsettling...

It is also hard to believe that a 50 year old's psychology won't change over the next 10-15 years in a way that makes him question the decision, but that's likely just me. I was a completely different man at 50 than I am at 62 (retired last year) and I am glad to be able to look back at those years as my most rewarding.

Should you retire? No. Even if you never had a problem living the life you think you want now, facing new challenges at work and being open to new personal opportunities that might come with greater wealth are worth the wait.

Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

Agree with others that you can retire. The only thing I would do is reduce my stock exposure to guard against sequence of return risk. The year before I retired I reduced my stock/bond allocation from 70/30 to 55/45. I created a CD ladder in tax deferred as part of my fixed income and will use it to rebalance as I sell from taxable.

I have a hard enough time understanding the willingness of a 62 year old to believe old historical US market data are the perfect independent variables for modeling a 30 year retirement period. The thought that a 50 year old would do so is unsettling...

It is also hard to believe that a 50 year old's psychology won't change over the next 10-15 years in a way that makes him question the decision, but that's likely just me. I was a completely different man at 50 than I am at 62 (retired last year) and I am glad to be able to look back at those years as my most rewarding.

Should you retire? No. Even if you never had a problem living the life you think you want now, facing new challenges at work and being open to new personal opportunities that might come with greater wealth are worth the wait.

+1
My concerns about the $3M nest egg are the possibilities of inflation, deflation, or other economic or policy event causing havoc with the plan. Working longer would be one way of helping protect. Also, possibly adding more to a long-bond and a TIPS or gold position (for deflation and inflation protection) might be helpful for the long run. That's regarding the viability of the nest egg for 40-plus years.

There's also the question of emotional happiness. I agree with the post quoted above that retiring at 50 may be premature. If work in the current position is really grinding away at happiness, maybe try-a job change or part-time work as a bridge to retirement might be worth trying.

The $3M nest-egg may be fine and OP may be a gloriously happy with retirement at age 50 or 51. But it's worth looking carefully at all assumptions before leaping. Whatever OP chooses to do, I hope OP will be happy and that things work out well.

I have a hard enough time understanding the willingness of a 62 year old to believe old historical US market data are the perfect independent variables for modeling a 30 year retirement period. The thought that a 50 year old would do so is unsettling...

It is also hard to believe that a 50 year old's psychology won't change over the next 10-15 years in a way that makes him question the decision, but that's likely just me. I was a completely different man at 50 than I am at 62 (retired last year) and I am glad to be able to look back at those years as my most rewarding.

Should you retire? No. Even if you never had a problem living the life you think you want now, facing new challenges at work and being open to new personal opportunities that might come with greater wealth are worth the wait.

Well, I think it is a matter of different people having different perspective.

First, it is not clear to me why only paid work would provide challenges and personal opportunities.
For me personally, I would find that outlook rather sad.

Second, it seems to me that people seeking 100% safety from running out of money (does not exist), sometimes fail to consider the risk of running out of time.

A 50 year old male has roughly a 20% chance of being dead before they reach age 65.

Weigh that against the possibility of someone like the OP who has several million dollars running out of money with a sub-3% WR plus Soc Sec.
For that to happen, several things would have to happen:

1) Market performance worse than has ever occurred
2) Person blindly follows withdrawal rate without cutting back a little
3) Someone who has managed to amass over $3M by age 50, somehow can't figure out how to make a little additional money if really necessary

Could all of those things happen? Sure, but I am willing to bet that the odds of that are significantly less than the 20% chance of being dead before reaching age 65.

Like i said, it is just that people have different perspectives. There is no wrong or right answer. It is an interesting discussion, but I doubt it will change anyone's mind.

Once in a while you get shown the light, in the strangest of places if you look at it right.

Yes you can retire tommorow. You have enough money and you seem to understand the risks. Yes health care is a risk. So is getting terminal cancer next week. So is getting bored in retirement and wanting to go back to work. That is life and we need to manage the issues as they occur.

I retired at 51 in 1998, 18 years ago. It was the best decision I ever made. Yes I had issues come up that were drastically off plan (cancer, down size house sale bounced twice, etc.) but I got through them. I also had way less money.

The only big advice I have is to not buy any very big assets for big $$ for a few years until you know your expenses better. And go find some fun cheap activities you love to keep you busy in retirement.

Well, I think it is a matter of different people having different perspective.

First, it is not clear to me why only paid work would provide challenges and personal opportunities.
For me personally, I would find that outlook rather sad.

Thank you for writing the reply I intended to write

There are plenty of things on my to-do list to keep me occupied. And none of them involve sitting on the couch and watching TV.

I don’t think anyone here can really evaluate whether someone is “psychologically” ready to pull the plug on their work career. Concerns can and generally get raised, but stating “no, you are not ready because you are too young” seems... not supported by any evidence. These threads ultimately have to focus on the financial aspect of the decision making process. Numbers don’t lie.

A 50 year old male has roughly a 20% chance of being dead before they reach age 65.

And “thank you” for reminding me of that. My grandma made it to 66, I think.

Actually, my wife is reminding me of that “option” every time we talk about our plans.

What do you think is going to happen in the next to years that is going to provide clarity going forward?

<snip>

It will not be cheap, but I am optimistic that there will be viable options available to us, as long as we stay flexible.

ACA is in danger of being driven into destruction. It's not like it is a well established, long running program and certain people who might be able to make it happen are actively working to kill it. Cutting national health care in the rest of the developed countries where such a program has been running for as long 70 years or so would be a far more difficult exercise.

Even with that state of affairs, lots of the retire early posts here have people assuming that ACA will be available for 5, 10, 20+ year early retirements. I think that over the next two to three years we will find out just how flexible people are going to have to be to get health care coverage. If you have the wrong sorts of health issues you may become uninsurable in the US - I've known folks like that and others in the thread have mentioned it. Maybe some states might have some sort of program - are you willing to sell up and move across the country? Are you willing and able to move to another country and will they take you? I wouldn't count on self insurance - a single large accident or expensive illness could sink a retirement.

My own expensive incident happened before retiring and was an approximately $1M condition ($500K with insurance discounts) that if untreated would have led to the death of a family member. Thankfully, I had top tier health insurance through my job and that family member is still with us. If you had been self insuring then that $1M would sink most retirements and put a large hole in the most of the rest. If you had been on private insurance under the old rules then if the policy renewal date occurred between diagnosis and treatment we might have not been renewed. If things get really bad we might see the return of the old dirty pool tactics of post-diagnosis underwriting where applications are scanned looking for unrelated small errors or omissions (forgot that bout of chicken pox as a kid? didn't get the date of your broken arm right?) to cancel your policy.

In the current climate, I wouldn't be retiring and relying on ACA or US health insurance in general unless I had serious plans for alternate health care and insurance. Not just hand-wavy stuff but really serious plans.

My father "retired" at age 56 with plenty of money. He immediately obtained a less stressful job because he knew he'd be bored out of his mind. He plans to work his plan B until age 70. I think retiring at age 50 is too early, regardless of how much wealth you've accumulated.

My father "retired" at age 56 with plenty of money. He immediately obtained a less stressful job because he knew he'd be bored out of his mind. He plans to work his plan B until age 70. I think retiring at age 50 is too early, regardless of how much wealth you've accumulated.

I was talking to my dad earlier this year about retirement. He retired at age 65, now is 80 years old. He said he wishes he had pulled the plug earlier. Didn’t mention a particular age.

As mentioned earlier, I don’t think it necessarily takes a paid employment (a traditional job) to not be bored out of ones mind. But obviously different people are... different.

My father "retired" at age 56 with plenty of money. He immediately obtained a less stressful job because he knew he'd be bored out of his mind. He plans to work his plan B until age 70. I think retiring at age 50 is too early, regardless of how much wealth you've accumulated.

I was talking to my dad earlier this year about retirement. He retired at age 65, now is 80 years old. He said he wishes he had pulled the plug earlier. Didn’t mention a particular age.

As mentioned earlier, I don’t think it necessarily takes a paid employment (a traditional job) to not be bored out of ones mind. But obviously different people are... different.

Short Version: $3.1M invested at age 50. Can I quit and go fishing now? Please?
[...]
So if you've read this far, please take another minute and tell me what you think. Does it look like I'm in good shape for retirement at age 50 and a half? Any advice? Thanks in advance.

I early retired in my mid-50s, with less savings than you, and a higher spending pattern. Yes, you are absolutely ready to leave the rats' race, and come fishing with me... Let me make my case with a very detailed analysis, please check this Web page and slowly scroll down to the bottom:viewtopic.php?f=9&t=139060&start=350

We did at 53 and 54 years old , but with good pensions, medical and no bills! Took big foreign vacations for many years plus 5-6 weeks in S. Florida until recently as we got tired of it by 75. Still able to invest and watch the folio grow into Flagship status while moving from a country cottage on a stream to a nice CCRC...Problem is how fast time slips by when you are having fun in the sun.....sigh.

SeeMoe

"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}